In the Matter of Compass Airlines P/L
[1992] FCA 596
•21 AUGUST 1992
Re: COMPASS AIRLINES PTY LTD No. N G3189 of 1992
FED No. 596
Evidence - Corporations
(1992) 10 ACLC 1380 / (1992) 8 ASCR 423
(1992) 109 ALR 119
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
Lockhart(1), Beaumont(2) and Gummow(2) JJ.
CATCHWORDS
Evidence - legal professional privilege - whether excluded by statute not expressly but by "necessary implication" - "fraud" exception to privilege - significance thereof in statutory construction - privilege against self-incrimination - relationship with legal professional privilege.
Corporations - Corporations Law - s. 597 examination - legal professional privilege - whether excluded by necessary implication.
Spedley Securities Limited (In Liquidation) v Bank of New Zealand (1991) 10 ACLC 77,
Re Transequity Limited (In Liquidation) (1991) 10 ACLC 95, and
Re BPTC (In Liquidation) (McLelland J, 29 May 1992, unrep.), considered.
HEARING
SYDNEY
#DATE 21:8:1992
Counsel and Solicitors Mr D.J. Jackson QC with
for Civil Aviation Mr C. Hodgekiss instructed by
Authority: Mallesons Stephen Jacques
Counsel and Solicitors Mr J.E. Thomson instructed
for Liquidator: by Blake Dawson Waldron
ORDER
THE COURT ORDERS THAT:
(1) The question for separate decision directed on 16 July 1992 to be determined by the Full Court, namely:
"Should the objections to inspection of documents which are made in para. 4 of the affidavit of H. A. Scott-Mackenzie sworn 14 July 1992 and filed herein, and which otherwise would be upheld, be rejected by reason of the operation of s. 597 of the Corporations Law?"
be answered "No."
(2) The liquidator of Compass Airlines Pty Ltd (In Liquidation) pay the costs of the Civil Aviation Authority of the determination of the question for separate decision.
JUDGE1
On 10 July 1992 Compass Airlines Pty Limited ("Compass") was wound up by order of the Court under the provisions of the Corporations Law. Mr I.D. Ferrier and Mr D.W. Knight, Official Liquidators, were appointed its joint liquidators. They had been appointed provisional liquidators of Compass on 20 December 1991.
On 19 June 1992 a Judge of the Court made orders directed to six persons, five of whom are officers or former officers of the Civil Aviation Authority ("the Authority"); the sixth person is the solicitor for the Authority. Two orders are directed to each of the six persons: one requiring him to attend the Court for examination on matters relating to Compass and to produce any books in his possession or under his control relating to Compass; the other requiring him to produce to the Court the documents specified in the Schedule to the order. All documents within the scope of the orders have been produced to the Court by five of the six persons (there is evidence that the sixth person was still searching for the documents when the hearing commenced). Objection is taken by the five persons who have produced documents to certain of the documents being inspected on the ground that they are the subject of legal professional privilege. The solicitor for the examinees (Mr H.A. Scott-MacKenzie) and for the Authority swore affidavits claiming legal professional privilege to protect certain of the documents from inspection which he says fall into the following categories:
(a) documents created between 1 January 1991 and 31 January 1992 for the sole purpose of the Authority receiving or being given legal advice, or recording such advice. These documents include correspondence between the Authority and its solicitors together with file notes or other documents recording conversations or other professional communications of a confidential nature between the Authority and its solicitors for the purpose of giving or obtaining legal advice;
(b) documents created since the appointment of the provisional liquidators either for the sole purpose of the Authority receiving or being given legal advice or for the sole purpose of use in reasonably anticipated legal proceedings between the provisional liquidators and the Authority. This is a reference to possible proceedings by the liquidators against the Authority to recover alleged preference payments made to the Authority by Compass during the period of six months preceding the commencement of the winding up of Compass totalling $10,351,523.90. Documents in sub-paragraph (b) include documents of a kind similar to those described in sub-paragraph (a) and instructions to counsel, advice from counsel and file notes or other documents recording advice from counsel.
On 16 July 1992 a Judge of the Court ordered, pursuant to Order 29 rule 2, that there be decided separately from any other question in the proceeding the question whether this objection to inspection of documents should be rejected by reason of the operation of s. 597 of the Corporations Law. On the same day the Acting Chief Justice of the Court directed, pursuant to s. 20(1)(A) of the Federal Court of Australia Act 1976, that a Full Court of the Court exercise the Court's original jurisdiction in relation to the determination of that question. On 21 July 1992, pursuant to the Acting Chief Justice's direction, this Full Court sat and heard argument on the question.
Section 597, so far as presently relevant, provides as follows:
"(1) In this section, a reference, in relation to a corporation, to a prescribed person, is a reference to an official manager, liquidator or provisional liquidator of the corporation or to any other person authorised by the Commission to make applications under this section or to make an application under this section in relation to that corporation.
(2) Where it appears to the Commission or to a prescribed person that:
(a) a person who has taken part or been concerned in the promotion, formation, management, administration or winding up of, or has otherwise taken part or been concerned in affairs of, a corporation has been, or may have been, guilty of fraud, negligence, default, breach of trust, breach of duty or other misconduct in relation to that corporation; or
(b) a person may be capable of giving information in relation to the promotion, formation, management, administration or winding up of, or otherwise in relation to affairs of, a corporation; the Commission or prescribed person may apply to the Court for an order under this section in relation to the person.
(3) Where an application is made under subsection (2) in relation to a person, the Court may order that the person attend before the Court on a day and at a time to be fixed by the Court to be examined on oath on any matters relating to the promotion, formation, management, administration or winding up of, or otherwise relating to affairs of, the corporation concerned.
(4) An examination under this section shall be held in public except to such extent (if any) as the Court considers that, by reason of special circumstances, it is desirable to hold the examination in private.
(5) The Court, on making an order for an examination, or at any later time, on the application of any person concerned, may give such directions as to the matters to be inquired into, and, subject to subsection (4), as to the procedure to be followed (including, in the case of an examination in private, directions as to the persons who may be present), as it thinks fit.
(6) A person who is ordered under subsection
(3) to attend before the Court shall not, without reasonable excuse:
(a) fail to attend as required by the order; or
(b) fail to attend from day to day until the conclusion of the examination.
(7) A person attending before the Court for examination pursuant to an order made under subsection (3) shall not refuse or fail to take an oath.
(8) A person attending before the Court for examination pursuant to an order made under subsection (3) shall not refuse or fail to answer a question that he or she is directed by the Court to answer.
(9) A person attending before the Court for examination pursuant to an order made under subsection (3), if directed by the Court to produce any books in his or her possession or under his or her control relevant to the matters on which he or she is to be, or is being, examined, shall not refuse or fail to comply with the direction.
(10) Where the Court so directs a person to produce any books and the person has a lien on the books, the production of the books does not prejudice the lien.
(11) A person attending before the Court for examination pursuant to an order made under subsection (3) shall not make a statement that is false or misleading in a material particular.
(12) A person is not excused from answering a question put to the person at an examination held under an order under subsection
(3) on the ground that the answer might tend to incriminate the person or make the person liable to a penalty.
(12A) Where:
(a) before answering a question put to a person (other than a body corporate) at an examination held under an order under subsection (3), the person claims that the answer might tend to incriminate the person or make the person liable to a penalty; and
(b) the answer might in fact tend to incriminate the person or make the person so liable; the answer is not admissible in evidence against the person in:
(c) a criminal proceeding; or
(d) a proceeding for the imposition of a penalty; other than a proceeding under this section, or any other proceeding in respect of the falsity of the answer.
(13) The Court may order the questions put to a person and the answers given by him or her at an examination under this section to be recorded in writing and may require him or her to sign that written record.
(14) Subject to subsection (12A), any written record of an examination so signed by a person, or any transcript of an examination of a person that is authenticated as provided by the rules, may be used in evidence in any legal proceedings against the person.
(15) An examination under this section may, if the Court so directs and subject to the rules, be held before such other court as is specified by the Court and the powers of the Court under this section may be exercised by that other court.
(16) A person ordered to attend before the Court or another court for examination under this section may, at his or her own expense, employ a solicitor, or a solicitor and counsel, and the solicitor or counsel, as the case may be, may put to the person such questions as the Court, or the other court, as the case may be, considers just for the purpose of enabling the person to explain or qualify any answers or evidence given by the person.
(17) The Court or another court before which an examination under this section takes place may, if it thinks fit, adjourn the examination from time to time.
(18) Where the Court that made the order under subsection (3) for an examination is satisfied that the order for the examination was obtained without reasonable cause, the Court may order the whole or any part of the costs incurred by the person ordered to be examined to be paid by the applicant or by any other person who, with the consent of the Court, took part in the examination."
The question in this case is whether a claim of legal professional privilege is available in respect of documents required to be produced pursuant to s. 597 of the Corporations Law. The question has arisen before in the context of either s. 597 of the Corporations Law or its immediate predecessor, s. 541 of the Companies (NSW) Code (the two provisions are substantially the same). In Spedley Securities Limited (In Liquidation) v Bank of New Zealand (1991) 10 ACLC 77 Cole J. of the Supreme Court of New South Wales held, in a judgment delivered on 29 November 1991 that, on the true construction of s. 541 of the Companies (NSW) Code, a claim of legal professional privilege is not available in respect of documents required to be produced pursuant to s. 541(9). However, Zeeman J. of the Supreme Court of Tasmania held on 16 December 1991 in Re Transequity Limited (In Liquidation) 10 ACLC 95 that on the true construction of s. 597 of the Corporations Law a claim of legal privilege is available in respect of documents required to be produced pursuant to s. 597(9). Then, in a judgment delivered on 29 May 1992 McLelland J. of the Supreme Court of New South Wales held in Re BPTC Limited (In Liquidation), unreported, that legal professional privilege remains available to a person required to produce documents or answer questions pursuant to s. 597, and his Honour declined to follow Cole J. in Spedley. In each of these three judgments close attention was paid to the judgment of the High Court in Corporate Affairs Commission of New South Wales v Yuill (1991) 172 CLR 319 in which the High Court held by majority (Brennan, Dawson and Toohey JJ., Gaudron and McHugh JJ. dissenting) that the power conferred by s. 295(1) of the Companies (NSW) Code upon an inspector to require the production of books of a corporation was not subject to a claim for legal professional privilege. Both Zeeman J. and McLelland J. distinguished Yuill, but Cole J. did not. I shall return to Yuill later.
Legal professional privilege protects a person from disclosing oral or written communications between himself and his solicitor or barrister made or brought into existence for the sole purpose of seeking or giving advice or for the sole purpose of use in existing or anticipated litigation: Grant v Downs (1976) 135 CLR 674 and Baker v Campbell (1983) 153 CLR 52. It is clearly established in Australia by the decision of the High Court in Baker v Campbell that legal professional privilege is not confined to judicial and quasi-judicial proceedings; that the doctrine is not a procedural rule but a substantive rule of the common law; and that legal professional privilege affords protection in respect of any statutory requirement to produce documents unless clearly abrogated by express words or necessary implication.
There are no express words in s. 597 or any other relevant provision of the Corporations Law abrogating the privilege; so the question is whether there emerges from the Corporations Law a necessary implication to abrogate the privilege.
Section 597 has a long history in companies legislation. Its immediate predecessor was s. 541 of the Companies Code 1981. Neither section has been confined to companies in the course of being wound up. Before the Companies Code, the Uniform Companies Act 1961 contained ss. 249 and 250 (later, in addition, s. 367A) which provided for private (s. 249) and public (s. 250) examinations of directors and officers of companies and others. Section 541 of the Code and s. 597 of the Corporations Law in substance combined ss. 249 and 250 (see s. 597(4)). Sections 249 and 250 were limited to companies in the course of being wound up, as were their precursors: ss. 253 and 254 of the Companies Act 1936 (NSW), ss. 123 and 124 of the Companies Act 1899 (NSW), ss. 173 and 174 of the Companies Act 1874 (NSW). The legislation of the other States contained comparable provisions. Those sections of the 1874 and 1899 Acts were limited to private examinations (see re John Pringle and Company Limited (1934) 34 SR(NSW) 508 at 512). Private examination of officers of companies goes back to s. 115 of the Companies Act 1862 (Eng) which empowered the Court, after a winding up order had been made, to summon before it any officer of the company or any person known or suspected to have in his possession any of the estate or effects of the company or supposed to be indebted to the company, or any person whom the Court might deem capable of giving information concerning the trade, dealings, estate or effects of the company. The Court could also require any such person to produce documents; and under s. 117 the Court was empowered to examine on oath either by word of mouth or upon written interrogatories any person so appearing concerning the affairs, dealings, estate or effects of a company.
Public examination was introduced into the law relating to the winding up of companies by s. 8 of the Companies (Winding Up) Act 1890 (Eng.) which provided for the public examination of promoters, directors and other officers of a company on the official receiver's application if the company was being wound up by the Court. Section 8 of the 1890 Act was carried through to later Australian legislation relating to public examination sections whereby the public examination of a promoter, director or other officer of a company could not take place unless the official receiver had in a further report named that person as a person who had committed fraud in the activities of the company or in relation to it since its incorporation. Examination of company efficiency was also available in the case of a voluntary winding up because of the sections of the companies legislation (e.g. s. 124 Companies Act 1890) which enabled the Court on the application of the liquidator or any creditor or contributory of a company in voluntary liquidation to exercise all or any of the powers which the Court might exercise if the company were being wound up by the Court: see Re Broken Hill and Argenton Smelting Co (1893) 19 VLR 111; In Re Campbell Coverings Limited (1953) Ch 488 and In Re Campbell Coverings Limited (No. 2) (1954) Ch 225.
There was close correspondence between these inquisitorial provisions under the Companies Legislation and the equivalent provisions with respect to individuals under bankruptcy legislation: see Re Grey's Brewery Co. (1883) 25 Ch D 400 at 403 and Bishopsgate Investment Management Limited (In Provisional Liquidation) v Maxwell (1992) 2 WLR 991 especially per Dillon L.J. at 1005-1014.
Like its predecessors, s. 597 plays an important role in the administration of companies in liquidation, other administrations in insolvency and "external administrations" generally (see Chapter 5 of the Corporations Law). Section 597 and its precursors have always related to the examination of persons before a court and the ancillary requirement of production of documents following the making of a court order for the attendance of the examinees. These provisions are to be contrasted with provisions which relate to the investigation of the affairs of companies (whether or not in the course of being wound up) by government regulatory authorities and the making of reports to those authorities. Provisions of this kind reflect the perceptions of legislatures from time to time that the public interest requires that something be done to guard against fraudulent conduct in the promotion and management of companies. The contemporary enactment of provisions of this latter kind is Part 3 of the ASC Law (entitled "Investigations And Information-Gathering") which has its origins in earlier enactments regulating the affairs of corporations. Part VII of the Companies Code 1981 was to a similar effect; and provisions of this kind may be traced back through the Uniform Companies Act 1962 (Part VIa), to the Companies Act 1856 (Eng) which provided for the inspection of a company's affairs by the Board of Trade. A careful analysis of these provisions is to be found in the judgment of Zeeman J. in Transequity at 99-100.
I know of no case in Australia or the United Kingdom prior to Spedley where it has been held that legal professional privilege cannot be called in aid by a person required to give evidence or to produce documents at an examination pursuant to s. 597 of the Corporations Law or any of its predecessors. Indeed, all the cases are to the contrary. As early as 1875 in Buckley on The Companies Acts, 2nd ed. (1875) the learned author said at 252, in respect of s. 115 of the 1862 Act (Eng) (the predecessor of s. 249 of the Companies Act 1961):
"The only matters as to which the witness can refuse to answer are matters in which he may incriminate himself, and matters involving professional confidence."
This passage was cited with approval by Baggallay L.J. in Re Silkstone and Dodworth Coal and Iron Company (1881) 19 Ch D 118 at 121 and by Dillon L.J. in Bishopsgate at 1012. Also in Re John Pringle Street J. said at 512, with respect to the examination of a witness under s. 123 of the Companies Act 1899 (NSW) that the examination was one where the examinee could not refuse to answer any question "unless some matter of privilege is involved or his answer may be likely to incriminate himself". Privilege against self-incrimination was also held to be available in the case of a person not an officer of the company by the Supreme Court of Victoria in O'Toole v Mitcham (1977) 2 ACLR 471. See also Wallace and Young, Australian Company Law and Practice 1965, 714, and three cases cited by Zeeman J. in Transequity at 101: Re McMillan Grain Co. (1927) 3 DLR 223, a decision of the Manitoba Court of Kings Bench; Re Ottoman Co Limited (1867) 15 WR 1069; and In Re Joseph Hargreaves Limited (1900) 1 Ch 347, though Zeeman J. did not find Joseph Hargreaves of much assistance. See also Re Gold Co. (1879) 12 Ch D 77 and Stiebel's Company Law and Precedents, 2nd ed., 1920, 1181.
It was argued by counsel for the liquidators that the express abrogation of the privilege against self incrimination in sub-ss. (12) and (12A) of s. 597 suggested the abrogation of legal professional privilege. In my opinion this circumstance does not support that conclusion; indeed, it may suggest the contrary conclusion, but is probably a neutral factor. Like legal professional privilege, the privilege against self incrimination is deeply ingrained in the common law. A statute will not be construed to abrogate the privilege against self incrimination unless the legislative intent to do so clearly emerges, whether by express words or necessary implication: Pyneboard; Crafter v Kelly (1941) SASR 237 at 242; Sorby v The Commonwealth (1983) 152 CLR at 309; Mortimer v Brown (1970) 122 CLR 493. See also Bishopsgate at 1001, 1002 and Hammond v Commonwealth of Australia (1982) 152 CLR 188 per Murphy J. at 200 and Brennan J. at 202-203; and the well-known statement of Goddard L.J. in Blunt v Parklane Hotel Limited (1942) 2 KB 253 (at 257):
"... no-one is bound to answer any question if the answer thereto would, in the opinion of the Judge, have a tendency to expose the deponent to any criminal charge, penalty or forfeiture which the Judge regards as reasonably likely to be preferred or sued for ..."
In Trade Practices Commission v Arnotts Limited (1990) ATPR 41-010 (2) Beaumont J. held that the question must be determined by considering whether the apprehended danger of prosecution is "real and appreciable, and not of an imaginary and insubstantial character" (at 51,191).
The privilege against self incrimination and legal professional privilege both spring from the common law; but they have different origins and arose for different purposes. Legal professional privilege protects from disclosure communications made to and from a legal adviser for the purpose of obtaining legal advice. The privilege against self incrimination ensures that a person does not expose himself to prosecution by self incriminatory statements. The difference between the two is graphically illustrated by the judgment of Kitto J. in Mortimer v Brown where it was held by the High Court that in a public examination under s. 250 of the Companies Act 1961 an examinee could not decline to answer a question on the ground that it might tend to incriminate him, subject to the exercise of any discretion which sub-s. (3) of s. 250 might repose in the Court to allow or disallow certain questions. Kitto J. (at 496) held that "the evident purpose of the section (s. 250), primarily even if not wholly, is to enable a suggestion of fraud or concealment of a material fact to be fully investigated by means of the public examination of certain classes of persons". Such questions, his Honour said, by their very nature must frequently involve consideration of evidence tending to incriminate individuals. He said at 496:
"To read down the wide terms of the section so as to allow a danger of self-incrimination as a valid ground for refusing to answer a question would render the provision relatively valueless in the very cases which call most loudly for investigation."
I see no reason whatsoever why this perception of the purpose of an examination under sections such as s. 250 of the Companies Act 1961 should lead to the abrogation of legal professional privilege.
I agree with McLelland J. in Re BPTC that the purpose of s. 541 of the Companies Code (s. 597 of the Corporations Law), namely, to enable a liquidator to gain information regarding the affairs of the company, would not be stultified if legal professional privilege could be claimed in relation to documents produced. I agree with his Honour's statement at 15:
"It could always be argued that the protection of legal professional privilege affects to some extent the operation of any statutory power to require disclosure of documents or information and I do not consider that in a practical sense the availability of legal professional privilege in an examination under s. 541 of the Code or s. 597 of the Corporations Law is likely to impair to any serious degree the efficacy of such an examination or the fulfilment of its legitimate purpose. In the particular case of a liquidator's examination, the liquidator himself can effectively waive any such privilege on behalf of the corporation (see Corporate Affairs Commission v Eastoe 7 ACLC 1051)."
Following Mortimer v Brown, the High Court in Pyneboard Pty Limited v Trade Practices Commission (1983) 152 CLR 328 held that s. 155 of the Trade Practices Act 1974 intended to abolish the privilege against self incrimination. Again in Hamilton v Oades (1989) 166 CLR 486 the High Court held that s. 541(12) of the Companies Code 1981 abrogated the privilege against self incrimination and followed its earlier decision in Mortimer v Brown. In all three cases it was held that the character and purpose of the relevant legislation, namely, the investigation of the conduct of persons who might be concerned, fraudulently or otherwise, to conceal information which ought to be revealed in the public interest, pointed inevitably to the exclusion of the privilege against self incrimination. In Hamilton v Oades Mason C.J. at 495 described Mortimer v Brown as "a striking illustration of statutory abrogation of the privilege where the intention to abrogate was ascertained by necessary implication." On the same page Mason C.J. said of the privilege against self incrimination:
"But the privilege is not lightly abrogated, and the phrase 'necessary implication' imports a high degree of certainty as to legislative intention."
I agree with Zeeman J. in Transequity that "privilege against self incrimination and legal professional privilege rests upon quite different foundations and are expressions of different public policy principles" (at 101). Reference must be made to Dawson J.'s judgment in Yuill, where his Honour said at 332:
"Privilege against self incrimination and legal professional privilege rests upon different, although not wholly unrelated, foundations."
Sub-sections (12) and (12A) of s. 597 contain an express qualification to the abrogation of the privilege against self incrimination, namely, that where the person claims before answering the question that the answer might tend to incriminate him and where the answer might in fact tend to incriminate him, the answer cannot be admissible in evidence against him in criminal proceedings other than proceedings under s. 597 or other proceedings in respect of the falsity of the answer. In the absence of that qualification this measure of protection would not have been available to the examinee following Mortimer v Brown. The Parliament expressly directed its attention to the question of the abrogation of the privilege against self incrimination, and in doing so modified the effect of the general law following Mortimer v Brown. In my opinion the presence of sub-ss. (12) and (12A) of s. 597 does not support the argument that the express, though qualified, abrogation of the privilege against self incrimination suggests an abrogation of legal professional privilege; if anything it suggests the contrary.
A powerful reason for there being no implied exclusion of legal professional privilege from s. 597 is that the privilege itself does not extend to communications made in furtherance of any criminal or fraudulent purpose: R v Bell; Ex parte Lees (1980) 146 CLR 141 at 145, 152-3, 161-2; R v Cox 14 QBD 153; Williams v Quebrada Railway Co (1895) 2 Ch 751; Bullivant's Case (1900) 2 QB 163, (1901) AC 196; O'Rourke v Darbishire (1920) AC 581 and Keep Bros v Birch and Bradshaw Limited (1928) NZLR 360. This exception to legal professional privilege tends directly against any implication that it is necessary for the effective conduct of an examination under s. 597 that the privilege be ousted. If the examination of the examinee reveals that the assertion of legal professional privilege is in fact being used to shield a criminal or fraudulent purpose which taints the communication itself, then the immunity is inapplicable.
Subject to the application, if any, of Yuill's Case I find that no necessary implication can be found in s. 597 or any other provision in the Corporations Law to abrogate the application of legal professional privilege with respect to an examination under s. 597 or the production of documents thereunder.
I turn now to Yuill's Case which involved documents that came into existence in the course of the professional relationship between solicitor and client. Yuill concerned s. 295(1) of the Companies Code which required persons to produce specified documents to inspectors appointed under Part VII of the Code. The majority of the High Court in Yuill held that the maintenance of legal professional privilege was inconsistent with and would frustrate the purposes underlying the investigatory powers in question (s. 295 of the Companies Code). The majority held also that upon the proper construction of Part VII of the Code the legislature did not intend the privilege to be available during the course of the investigation.
The majority of the Court consisted of Brennan, Dawson, Toohey JJ. Brennan J. and Dawson J. delivered separate reasons for judgment. Toohey J. concurred with Dawson J.'s judgment. Gaudron J. and McHugh J. delivered separate judgments in dissent.
Close reliance was placed by the majority upon the provisions of the Code which linked investigations by the Corporate Affairs Commission with reports and consequent proceedings concerning misconduct in relation to the affairs of companies. Brennan J. concluded that legal professional privilege was not available as a ground for resisting disclosure on two grounds: first, because the phrase "reasonable excuse" in s. 296(2) (which provided that "A person shall not, without reasonable excuse, refuse or fail to comply with a requirement made under section 295") should be construed on the basis of the law as enunciated in O'Reilly v State Bank of Victoria (1983) 153 CLR 1, which confined the operation of legal professional privilege to communications between lawyers and their clients in judicial or quasi-judicial proceedings. This circumstance led his Honour to conclude that the absence of any express exclusion of legal professional privilege could not support an argument that it was intended to limit the powers conferred by s. 295(1). The second ground supporting his Honour's conclusion was that, following Baker v Campbell, the legislation evinced the intention that legal professional privilege should not be a "reasonable excuse" for non compliance. His Honour said at 326:
"An investigation into the affairs of a corporation may extend to the possible commission of offences, the possible occurrence of fraud, negligence, default, breach of trust, breach of duty or other misconduct occasioning damage to the corporation and the possible taking or non-return of the corporation's property: see s. 306(8) and (11). An inspector's ability to satisfy the public or national interest or to meet the concerns of the Ministerial Council on these topics would be significantly diminished if the inspector were not empowered effectively to compel full disclosure of the contents of privileged communications passing between legal advisers and persons whose conduct is material to the investigation."
Dawson J. found that s. 299(2)(d) of the Companies Code (the equivalent of s. 76(1)(d) of the Australian Securities Commission Act 1989, the "ASC Law") indicated a legislative assumption that legal professional privilege was not available. His Honour held that the generality of the requirement in s. 295 of the Companies Code in the context of the objects and purposes of the investigating scheme relating to companies evinced an intention to exclude the privilege by necessary implication. These factors were held by Dawson J. to exclude legal professional privilege from the ambit of "reasonable excuse" in s. 296(2) of the Code on the basis that this phrase "more aptly refers to any physical or practical difficulties in complying with a requirement".
Yuill is distinguishable from the present case on a number of grounds:-
. Yuill was not concerned with s. 541 of the Code (the equivalent of s. 597 of the Corporations Law), but with provisions which are now broadly equivalent in Part 3 of the ASC Law. I referred earlier to the history of statutory provisions which empower courts to order the examination of directors and other persons associated with companies in the course of being wound up and under official management and to other statutory provisions which relate to the investigation of the affairs of companies by government agencies, the two forms of investigation having different historical origins, serving basically different (though overlapping to some degree) purposes and governed by different statutory regimes. . Section 597 is primarily concerned with the particular company, its creditors and contributories (see s. 597(1) which prescribes the class of persons who may make application for a court order under the section and s. 597(2) which states the matters that must be established before an application can be made to the Court under the section (s. 597(2)). Section 597 can apply even if there is no suspicion of unlawful or improper conduct: see s. 597(2)(b). Unlike Part 3 of the ASC Law the primary purpose of s. 597 is not to investigate the possible commission of offences. Although the differences between private and public examinations inherent in ss. 249 and 250 of the Companies Act 1961 and their predecessors have been abolished in s. 597, nevertheless s. 597 is essentially a section where the investigative process is initiated by the liquidator, provisional liquidator or official manager, of the company or by the ASC or person authorised by it. The examination is conducted before the Court and the purpose of the investigation is to ascertain material relevant to the specific company concerned and its affairs. It is of course like all such sections a public interest provision to some degree, but essentially it is concerned with obtaining information and documents with respect to the affairs of a particular company. It is not necessary that an initial finding is made by the ASC or anybody else of fraud or some other default on the part of the person to be examined to found an order for examination under s.
597. It is sufficient if it appears to the ASC or a "prescribed person" that a person is capable of giving information in relation to the promotion, formation, management, administration or winding up of or otherwise in relation to the affairs of a corporation. Section 597 is to be contrasted with Part 3 of the ASC Law which confers wide powers of investigation upon the ASC including the power to require a person to submit to examination on oath before an inspector and to produce books. The ASC may report about an investigation to the Minister and shall do so if directed by the Minister. The report must be provided to the Minister and may be provided also in some circumstances to certain law enforcement agencies. Section 13 of the ASC Law is a concise statement of the purpose of investigations under Part 3 of that law, namely, the ASC may make such investigation as it thinks expedient for the due administration of a national scheme law where it has reason to suspect that there may have been committed a contravention of a national scheme law or of a relevant law of Commonwealth or of a State or Territory concerning the management or affairs of a body corporate or involving fraud or dishonesty and relating to a body corporate, securities or futures contracts. Thus, it is a condition precedent to the conduct of any investigation under Part 3 that the ASC first has reason to suspect that there may have been a contravention of a relevant law or that "unacceptable circumstances" have occurred or may occur within the meaning of Part 6.9 of the Corporations Law. The Part 3 powers are exercisable by the ASC in the public interest to ensure that the law is complied with, whether that unlawful conduct affects a particular company, its creditors or contributories or not (in contrast to s. 597).
. Section 597 is essentially a fact finding and information gathering exercise, whereas under s. 295 and s. 305 of the Code, the inspector is obliged to report his opinion on the affairs of the company and the facts upon which that opinion is based. . The specific provision dealing with legal professional privilege in the Companies Code (s. 308, the equivalent section in the ASC Law being s. 69) has no equivalent in s. 597. Section 308 created a specific exemption which entitled lawyers to refuse to comply with a notice issued under s. 295 where compliance would involve a breach of legal professional privilege. Also the specific protection afforded by s. 299 of the Code against certain uses of statements which would otherwise be protected by legal professional privilege has no equivalent in s. 597. . None of the specific provisions of the Companies Code referred to by Dawson J. to support his findings of the abrogation of legal professional privilege are to be found in s. 597 except for s. 597(12) and (12A) specifically dealing with self incrimination. I mentioned earlier that sub-ss. (12) and
(12A) does not support that argument of the abrogation of legal professional privilege. . There is no requirement in s. 597 for the person to whom disclosure may be required to form or report any opinion in contrast to s. 305 of the Code; . There is in s. 597 no express reference to a solicitor for a corporation such as is found in paragraph (a) in the definition of "officer" in s. 289(1) of the Code.
Yuill was applied by French J. in Australian Securities Commission v Dalleagles Pty Limited, unreported, 24 June 1992 in support of his finding that the provisions of the ASC Law were intended to exclude the operation of legal professional privilege in relation to the production of books under a notice issued pursuant to s. 33 of that law; but his Honour was not dealing with s. 597.
For these reasons I am of the opinion that there is no necessary implication to be gleaned from s. 597 or other provision of the Corporations Law to abrogate the availability of a claim for legal professional privilege with respect to an examination under s. 597, either in relation to the answering of questions on such an examination (sub-s. (8)) or in producing books (sub-s. (9)).
I should add some brief observations on s. 597(8) and (9). It is a requirement of sub-s. (8) that a person attending before the Court for examination shall not refuse or fail to answer the question that he or she is directed by the Court to answer, and of sub-s. (9) that a person attending before the Court for examination, if directed by the Court to produce books in his or her possession or under his or her control relevant to the matters on which the examination is to take place, shall not refuse or fail to comply with the direction. Neither of these provisions touches the question before us.
The objection of the Authority and the five prospective examinees to the inspection of documents produced by it to the Court pursuant to the order of the Court made on 19 June 1992 should be upheld. I would answer the question referred to the Full Court in the negative. The liquidators must pay the costs of the Authority of the hearing before this Full Court.
In conclusion it should be stated that it was not argued before us that the Authority is the Commonwealth or an emanation of the Crown in right of the Commonwealth, so no questions arose before us with respect to those matters.
JUDGE2
We have had the advantage of reading the judgment of Lockhart J. We concur with it and would merely add what follows in support of his conclusions.
We agree with Lockhart J. that the test for the exclusion of common law rights by "necessary implication" has not been satisfied here. We refer to the recent statement by Deane, Dawson, Toohey and Gaudron JJ. in Wentworth v New South Wales Bar Association (1992) 106 ALR 624 (at 629-30) as follows:
"There are certain matters in relation to which legislative provisions will be construed as effecting no more than is strictly required by clear words or as a matter of necessary implication. They include important common law rights, procedural and other safeguards of individual rights and freedoms and the jurisdiction of superior courts."
As Lockhart J. has pointed out, the circumstance that legal professional privilege does not protect communications made in furtherance of a criminal or fraudulent purpose, suggests that the privilege was not intended to be excluded by implication by s.597. The width of the crime or fraud exception is illustrated by the circumstances of three decisions of the High Court in which the exception was considered.
In Varawa v Howard Smith and Co. Ltd. (1910) 10 CLR 382, the plaintiff, who had sued the defendants for malicious arrest and for abuse of process, sought to administer interrogatories to the defendants as to whether the defendants had obtained any advice as to the liability of the plaintiff before they arrested him. It was held that, if the arrest was unlawful, the unlawful proceeding did not begin until after the advice had been given, and that as the communication between the defendants and their solicitor was not shown to have been made in furtherance of an illegal object, it was privileged.
Griffith C.J. said (at 385) that legal professional privilege did not apply "to a case of fraud, or intended fraud, or of intended crime." He went on to say (at 385):
"There is nothing criminal or unlawful in a solicitor telling his client that he does not think he has a good cause of action. So far there is nothing in the nature of a crime or unlawful proceeding. The unlawful proceeding does not begin until after the advice has been given. There is therefore nothing to take the communication inquired into out of the general rule of privilege."
O'Connor J. said (at 386):
"...the privilege will not be lost unless in the course of the proceeding in which the evidence is tendered it is definitely charged that the communication was in itself a step in the commission of a crime or preparatory to or in aid of the commission of a crime. The same rule applies where the communication is a step in, or preparatory to, or in aid of what has been called 'civil fraud', that is the carrying out of a fraud not amounting to a crime, but in respect of which the Civil Courts will give relief. A communication made under any of those circumstances loses the privilege, and it is immaterial whether the solicitor was or was not aware of the criminal or fraudulent purposes of the communication at the time when the communications were going on."
Isaacs J. said (at 390):
"If the client is a person intending to commit a fraud he may either bring in the solicitor as co-conspirator with him, in which case the position is beyond dispute, or else he might use the solicitor as an unconscious instrument in the commission of a crime, thereby deceiving his legal adviser. The privilege where it exists being that of the client, his guilt is sufficient to destroy it, whether the solicitor is party to it or not. The keynote of the position, however, must be that the information as to which privilege is denied must be as to some act which is in furtherance of an illegal object. If so, then the foundation of the rule disappears, and it comes under the ordinary principle that the party may be compelled to give relevant discovery for the administration of justice."
In The Queen v Bell; Ex parte Lees (1980) 146 CLR 141 it was held, in Family Court proceedings, that a communication by the wife to her solicitor as to the whereabouts of a child of the marriage was not privileged.
Gibbs J. said (at 145):
"...there is another exception, which may possibly be regarded as an extension of the rule which excludes privilege in the case of crime or fraud, but which I incline to think rests upon an independent foundation. It has been held that a solicitor is obliged to give to the court any information (including his client's address) which will enable the court to discover the whereabouts of a ward of court whose residence is being concealed from the court, and that such information may not be the subject of a claim for professional privilege."
Stephen J. said (at 152):
"The law, although anxious to ensure unrestrained recourse to professional advice on the part of those whose legal rights or duties are in question, has no concern to encourage those who seek advice so that they may the better undertake or continue criminal or fraudulent conduct."
He went on to say (at 156):
"One thing is clear. It is that privilege for an address cannot be claimed when its confidentiality was sought, as here, in order to frustrate the process of law."
Murphy J. held that the welfare of the child should "prevail over" the privilege (at 159).
Wilson J. (Aickin J. agreeing) said (at 161):
"The privilege is grounded in public policy. It is in the public interest that confidential professional communications between solicitor and client should be uninhibited by any fear of disclosure. But it would be odd if the privilege extended to protect communications which were directed against the public interest. It is therefore necessary to ask whether the attachment of confidentiality to the wife's address was against the public interest in such a sense as to deny to it the cloak of privilege."
He later observed (at 162):
"The attorney's duty cannot extend to aiding and abetting the client to evade the impact of the orders of the court either by acts of commission or omission."
In Attorney-General for the Northern Territory of Australia v Kearney (1985) 158 CLR 500, a claim of privilege was made, in the course of discovery in a land claim, for documents described as communications between officers of the Northern Territory Government for the purpose of obtaining and giving legal advice relating to the making of certain regulations. It was established, prima facie, that the communications came into being as part of a scheme to defeat the land claims. It was held that the communications were not privileged.
Gibbs C.J. (Mason and Brennan JJ. agreeing) said (at 515):
"In my opinion the present case comes within the principle which forms the basis of the rule that denies privilege to communications made to further an illegal purpose. It would be contrary to the public interest which the privilege is designed to secure - the better administration of justice - to allow it to be used to protect communications made to further a deliberate abuse of statutory power and by that abuse to prevent others from exercising their rights under the law. It would shake public confidence in the law if there was reasonable ground for believing that a regulation had been enacted for an unauthorized purpose and with the intent of frustrating legitimate claims, and yet the law protected from disclosure the communications made to seek and give advice in carrying out that purpose."
Wilson J. referred (at 523) to observations made by Goff J. in Crescent Farm (Sidcup) Sports Ltd. v Sterling Offices Ltd. (1972) Ch 533 at ( 564-5) that the exception is confined to "cases of crime or fraud...(and) fraud in this connection is not limited to the tort of deceit and includes all forms of fraud and dishonesty such as fraudulent breach of trust, fraudulent conspiracy, trickery and sham contrivances..." Wilson J. said (at 524):
"The principle may be expressed by saying that, generally speaking, the public interest in the protection of alleged confidential professional communications will not be outweighed by the public interest in ensuring that all relevant evidence is admissible save when the professional relation is abused in a manner involving dishonesty that goes to the heart of the relationship."
Wilson J. went on to say (at 525-6):
"...I think it wholly inconsistent with the reason for the privilege that it should protect a government's deliberate abuse of its statutory powers. In this regard, the exception for fraud should be understood in the broad manner described by Goff J. in Crescent Farm... It includes all forms of dishonesty, including 'trickery and sham contrivances'."
The English authorities in this area are surveyed by A.L.E. Newbold in his article "The Crime/Fraud Exception to Legal Professional Privilege" (1990) Vol. 53 No. 4 Modern Law Review at 472; see also Finers v Miro (1991) 1 WLR 35 per Dillon L.J. at 40.
In considering the scope of the "fraud" exception to legal professional privilege, it should also be borne in mind that there is now a greater willingness to permit cross-examination upon claims to legal professional privilege: National Crime Authority v S (1991) 29 FCR 203 at 211, Hartogen Energy Limited (in Liquidation) v The Australian Gaslight Company NG 667 of 1990, 7 July 1992, Gummow J., unreported, pp 4-5.
In Waterford v The Commonwealth (1987) 163 CLR 54, Mason and Wilson JJ. held (at 64) that "(w)hile the area covered by the (public interest) immunity doctrine may overlap with that covered by legal professional privilege, the application of each is the subject of an entirely separate exercise." They said (at 64-5):
"Legal professional privilege is itself the product of a balancing exercise between competing public interests whereby, subject to the well-recognized crime or fraud exception (cf. Reg. v. Bell; Ex parte Lees..., the public interest in 'the perfect administration of justice' (per Earl of Halsbury L.C. in Bullivant v. Attorney-General
(Vict.)... is accorded paramountcy over the public interest that requires, in the interests of a fair trial, the admission in evidence of all relevant documentary evidence. Given its application, no further balancing exercise is required. It follows that an established claim of legal professional privilege can never be set at nought by a finding, after inquiry, that the document is not one to which a claim to public interest immunity would attach. If that were the case it would have the effect of imposing a further general condition limiting the privilege to apply only to those communications in respect of which any question of public interest immunity was wholly irrelevant. Furthermore, if the question of public interest immunity is to be considered, the balancing exercise that is then required will be carried out by reference to the contents and character of the document rather than by regard to the circumstances of its creation. The fact, if it be the fact, that the document is also the subject of legal professional privilege is immaterial to that inquiry."
Brennan J. said (at 74):
"That the public interest accounts for both legal professional privilege and public interest immunity is clear: as to the former, see Reg. v. Bell; Ex parte Lees...; as to the latter, see Sankey v. Whitlam...But the public interest served by legal professional privilege lies in its tendency to broaden the operation of the rule of law as well as to enhance the individual's capacity to secure its protection, whereas the public interest served by public interest immunity is the protection of some of the processes of the Executive Government: see Sankey v. Whitlam... The public interest which accounts for legal professional privilege explains the existence of the general legal rule, but it does not fall to be evaluated by the court in every case as must be done when public interest immunity is raised: see per Lord Scarman in Air Canada v. Secretary of State for Trade... If legal professional privilege applies, the court has no function to perform in deciding whether the privilege otherwise advances or diminishes the public interest."
Moreover, as Gummow J. pointed out in Hartogen, although it is well settled that one aspect of the rationale of the doctrine of legal professional privilege is that the ready availability of confidential legal advice is in the public interest because it promotes both the observance of the law generally and the administration of justice generally, there is a distinct body of substantive law concerned with protection of confidential information (at p 8).
Likewise, the privilege against self-incrimination (the exercise of which in civil proceedings has recently been described by the House of Lords as "an archaic and unjustifiable survival from the past": A.T. and T. Istel Ltd. v. Tully, 20 July 1992, The Times Law Reports per Lord Templeman) rests on foundations which are quite different from the rationale of the doctrine of legal professional privilege. In Regina v Director of Serious Fraud Office, Ex parte Smith (1992) 3 WLR 66, Lord Mustill said (at 74) that "the right of silence" referred to a disparate group of immunities. Legal professional privilege was not one of them.
Lord Mustill went on to say (at 83-4):
"That there is strong presumption against interpreting a statute as taking away the right of silence, at least in some of its forms, cannot in my view be doubted. Recently, Lord Griffiths (delivering the opinion in the Privy Council in Lam Chi-ming v. The Queen (1991) 2 AC 212, 222) described the privilege against self-incrimination as 'deep rooted in English law,' and I would not wish to minimise its importance in any way. Nevertheless it is clear that statutory interference with the right is almost as old as the right itself. Since the 16th century legislation has established an inquisitorial form of investigation into the dealings and assets of bankrupts which is calculated to yield potentially incriminating material, and in more recent times there have been many other examples, in widely separated fields, which are probably more numerous than is generally appreciated.
These statutes differ widely as to their aims and methods. In the first place, the ways in which the overriding of the immunity is conveyed are not the same. Sometimes it is made explicit. More commonly, it is left to be inferred from general language which contains no qualification in favour of the immunity. Secondly, there are variations in the effect on the admissibility of information obtained as a result of the investigation. The statute occasionally provides in so many terms that the information may be used in evidence; sometimes that it may not be used for certain purposes, inferentially permitting its use for others; or it may be expressly prescribed that the evidence is not to be admitted; or again, the statute may be silent. Finally, the legislation differs as to the mode of enforcing compliance with the questioner's demands. In some instances failure to comply becomes a separate offence with prescribed penalties; in others, the court is given a discretion to treat silence as if it were a contempt of court. In the light of these unsystematic legislative techniques there is no point in summarising the various statutes drawn to our attention. They do no more than show that the legislature has not shrunk, where it has seemed appropriate, from interfering in a greater or lesser degree with the immunities grouped under the title of the right to silence."
Later, Lord Mustill (at 87) referred to the following statement of Windeyer J. in Rees v. Kratzmann (1965) 114 CLR 63 at 80:
"If the legislature thinks that in this field the public interest overcomes some of the common law's traditional consideration for the individual, then effect must be given to the statute which embodies this policy."
In Mortimer v. Brown (1970) 122 CLR 493, where it was held that, in a public examination under the Companies legislation, an examinee may not decline to answer a question on the ground that the answer may tend to incriminate, Walsh J., after referring to the observations of Windeyer J. in Rees v. Kratzmann, said (at 499):
"This view, with which I am in respectful agreement, means that, having regard to the purpose of s.250 and to the public interest which it is intended to serve, the contention should not be accepted that there should be applied to its construction the principle that a statute should not be construed as being intended to take away common law rights unless that intention is specifically stated."
Given these background considerations, we agree with Lockhart J. that it is one thing to construe a provision of the type found in s.597 as taking away, by implication, the right of silence; yet it is a different thing to read into such a provision an intention to eliminate the very different privilege inherent in a proper legal professional relationship.
We further agree with Lockhart J. that Yuill's case may be distinguished for present purposes.
We would answer the question referred to the Full Court in the negative. We agree with Lockhart J. that the liquidator must pay the costs of the Authority of this argument.
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